The most vibrant, audacious companies in the world are in East Asia; Eastern Exposure takes a new look at what they’re doing and why it makes a difference for decision-makers in the West. I’ve been doing this the last few years for Forbes, Forbes Asia and other publications, and as a consultant. Much of my career has been in the corporate world as a marketer for global telecom and media giants, but I’ve also started two companies, and ran an ad agency back when you could shoot dice at the Treasure Island with Bill Gates at 3 a.m.

High Market Cap Propels Hospital Operator IHH Into Top 50

Rising incomes mean healthy results for Malaysia’s IHH, leading a pack of private hospital operators offering more choice to a growing middle class

(Appears in print edition as Treating the Good Life.)

Badminton was the first to go. Then it was table tennis. Before long this once-tireless athlete had given up cycling, running and climbing, and just lay about listless. Doctors in his native Sri Lanka knew he needed a kidney transplant. But they also knew that only a few places in Asia could handle a case as complex as his–a scary prospect for this 9-year-old.

Meanwhile, doctors for a much older patient had given up hope. The 81-year-old retired executive had fallen to a host of maladies and lay unconscious in the hospital with his family gathered around. Help was just a short flight out of Jakarta, but away from the blinking monitors and whirring ventilators of intensive care he would succumb within minutes.

Providing care for the sick and injured is a hard business to be in at any scale. The practices, the technologies and, most of all, the patients don’t always obey the rules of the marketplace. Few industries fall so far under the heavy hand of regulators. In Southeast Asia Kuala Lumpur’s IHH HealthcareIHH Healthcare has emerged as the biggest of a group of listed providers prospering by catering to the increasingly affluent middle class. This year it breaks into the Fab 50 for the first time.

IHH went public only in July 2012. But as the offspring of two venerable hospital operators, Singapore’s Parkway and Malaysia’s Pantai, it’s no upstart. A takeover fight for Parkway a few years ago left India’s Fortis Healthcare in the cold–and alerted investors to the region’s possibilities for profits in private health care.

“There’s a new market that’s growing with some exuberance across the region,” says one analyst of East Asia’s healthcare businesses, Alexander Ng of McKinsey & CompanyMcKinsey & Company. “Parkway always had credibility, but its professionalism in medicine and as a business had begun to attract patients from all over.” Investors figured the same model could work well wherever incomes and expectations for a premium experience are rising. Southeast Asian countries, he said, spend only 4% or 5% of annual GNP on healthcare right now – plenty of room for growth.

The expectations have paid off. The stock has soared 75% since the initial offering, and IHH is now the second-largest health care provider in the world by market capitalization, behind only U.S. hospital operator HCA HoldingsHCA Holdings. Revenue should rise 14% this year, to $2.4 billion, with net profits climbing 19% to $238 million, according to BloombergBloomberg. It added 1,000 beds last year and now counts 25,000 employees. “This is more than a vindication that size and scale can make our business model work,” says Dr. Tan See Leng, managing director and chief executive. “This proves that the people of the region are ready to support health care as an integral aspect of the good life.”

Consider Mount Elizabeth Novena Hospital, opened in 2012. The most expensive hospital ever built in Singapore, it’s designed like a business hotel, with soothing interiors and public sight lines to keep anyone from guessing they’re in a place with sick people. In the 40 private intensive care rooms all of the gear hangs from the ceilings to make more room for caregivers. It also has 22 secured multiroom suites, 3 with enough space for the retainers, family and bodyguards of royalty, both dynastic and corporate, and its own custom-designed scent.

None of this is meant to replace state and nonprofit facilities, the company says. But it is meant to pamper patients, retain doctors and reduce waiting times for beds, a persistent problem throughout the region.

Staff-to-patient ratios in private facilities are often three times those of public facilities. At Kuala Lumpur’s Gleneagles Hospital this allows physiotherapists to design care programs for patients recovering from surgery. “Medical doctors ratify everything, but we’re the ones who assemble the team,” says Hannah Pearson, head of rehabilitation services for the Malaysian unit of IHH, adding that this unusual step also saves time for doctors.

In most hospitals lessons like these stay in-house. But Pearson shares findings with her peers throughout the IHH network, now comprising 37 hospitals and more than 6,000 beds, and operating from China and Vietnam to India and Turkey. “Collective intelligence helps best practices emerge,” says Tan, who became head of IHH in January, ten years after joining Parkway after leaving the private primary health care network he’d started. “Only a network of this scale is in a position to aggregate so many experiences.”

The dealmaking that resulted in IHH–originally Integrated Healthcare Holdings–erupted suddenly. Khazanah Nasional, Malaysia’s sovereign wealth fund, had been looking for a suitable health care investment. “We’ve seen the demographics shaping up for years,” recounts Ahmad Shahizam, formerly at Khazanah and now executive director, corporate services, at IHH.

Opportunity struck in 2010. “Nobody [in Singapore] wanted to see their beloved Parkway end up with Fortis,” one Singapore policy analyst says of the Indian company’s futile offer, which would’ve replaced local management. Khazanah, which already held the controlling interest in Pantai, came in as a white knight bidder for Parkway and won. Then it sold a 30% share to Japan’s Mitsui. The Parkway-Pantai combination went public, raising $2.1 billion in the world’s sixth-biggest listing of 2012 (Facebook’s was the biggest). Khazanah’s stake is now 44%, and Mitsui’s is 20%.

Going public freed up IHH to shop for business in more countries. It beat out rival Fortis again, this time as part of a joint venture to build and manage a hospital in Hong Kong. “To win this deal we did more than make assertions about what we can do,” says Tan. “We have results, proven results.” Once it opens in late 2016, the new Gleneagles Hong Kong Hospital will benefit from high local rates and little for-profit competition. “Best of all,” according to Goldman Sachs’ Miang Chuen Koh, “this gives them exposure to the Chinese mainland.” With a lengthy average hospital stay of more than two weeks, that’s a market that can use professional management.

IHH’s toughest challenge lies thousands of miles to the west. Its purchase of a controlling interest in Turkey’s 17-hospital Acibadem Holdings, analysts say, disappointed IHH at first and dragged down results for several quarters before picking up just in time for a glowing 2013 report. Now the company intends it as a proof of the benefit of its size–the ability to train nurses in Southeast Asia and deploy them in force in a new market and to train Turkish nurses in Asia, for example.

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